Question

On the first day of the fiscal year, a company issues a $2,000,000, 8%, five-year bond that pays semiannual interest of 80,000

(2 million x 8% x ½)
, receiving cash of $2,170,604. Journalize the bond issuance.

Answer 1

To journalize the bond issuance, record the transaction as follows: Cash $2,170,604; Discount on Bond Payable $170,604; Bond Payable $2,000,000.

Step-by-step explanation:

To journalize the bond issuance, we need to record the transaction in the company's accounting books. Here is the journal entry:

• Cash $2,170,604
• Discount on Bond Payable $170,604
• Bond Payable $2,000,000

The cash received is debited to the Cash account, the discount on the bond payable is debited to the Discount on Bond Payable account, and the bond payable is credited to the Bond Payable account.